--Traders focus on ETFs that track emerging-market stock ETF
--U.S. stocks rally after China's cut to its reserve-requirement ratio
--Options traders look for rise in Taiwan, Malaysia ETFs
(Updates with closing stock prices.)
NEW YORK (Dow Jones)--Traders in the options market made a series of bullish bets on emerging markets and Asia after China moved to give a shot in the arm to its economy, the world's second-largest.
The People's Bank of China said it would cut the reserve-requirement ratio for major banks for the first time since December 2008. Investors said the surprise policy action, which would free up lending, likely reflects a more-aggressive stance toward targeting economic growth.
The move came just hours before major central banks disclosed a joint agreement to reduce the cost for Europe's banks to receive dollar loans. Investors cheered the developments, and the Dow Jones Industrial Average closed Wednesday up 4.2%.
For emerging-market stocks, China's reserve-requirement ratio cut is "definitely a constructive sign," said Vijay Chopra, managing director of international equity at Mesirow Financial. "The government is changing its stance from tightening to loosening."
Among the U.S. options market's largest single trade was a bet that the iShares MSCI Emerging Markets (EEM) exchange-traded fund can climb higher over the next several weeks.
A buyer picked up 50,000 call options that convey the right to buy shares of the ETF for $44 by Dec. 16, according to derivatives strategists at Susquehanna Financial Group. The ETF rose $2.35, or 6.2%, to close at $40.01. The contracts work best should shares jump 10% by expiration.
Separately, a trader bought a large block of $38-strike December EEM calls and also sold $44 calls that expire in the same month. The "spread" profits most should the ETF close at $44 over the next two and a half weeks.
EEM is made up of more than 800 global stocks, and its largest holdings include China Mobile Ltd. (CHL, 0941.HK) and Samsung Electronics Co. (SSNHY, 005930.SE).
Additionally, options traders, with unusual gusto, targeted ETFs that track Taiwanese and Malaysian stocks. Bullish positioning drove Wednesday's overall options volume in the iShares MSCI Taiwan Index Fund (EWT) to four times the daily average, according to data from Trade Alert.
One trader established a new position by purchasing roughly 15,000 January $13 call options. EWT rose 46 cents, or 3.9%, close at $12.35 Wednesday. The contracts turn a profit should the ETF gain about 7% and surpass $13.22 by the middle of January.
Meanwhile, in the iShares MSCI Malaysia Index Fund (EWM), traders targeted $14-strike calls that expire in December and January. Wednesday's call volume in the ETF was 15 times the daily average. Just 10 put options in the ETF traded compared with 15,000 calls.
Shares of EWM rose 79 cents, or 6%, to close Wednesday at $14.04.
The People's Bank of China said it would cut the reserve-requirement ratio for major banks for the first time since December 2008. Investors said the surprise policy action, which would free up lending, likely reflects a more-aggressive stance toward targeting economic growth.
The move came just hours before major central banks disclosed a joint agreement to reduce the cost for Europe's banks to receive dollar loans. Investors cheered the developments, and the Dow Jones Industrial Average closed Wednesday up 4.2%.
For emerging-market stocks, China's reserve-requirement ratio cut is "definitely a constructive sign," said Vijay Chopra, managing director of international equity at Mesirow Financial. "The government is changing its stance from tightening to loosening."
Among the U.S. options market's largest single trade was a bet that the iShares MSCI Emerging Markets (EEM) exchange-traded fund can climb higher over the next several weeks.
A buyer picked up 50,000 call options that convey the right to buy shares of the ETF for $44 by Dec. 16, according to derivatives strategists at Susquehanna Financial Group. The ETF rose $2.35, or 6.2%, to close at $40.01. The contracts work best should shares jump 10% by expiration.
Separately, a trader bought a large block of $38-strike December EEM calls and also sold $44 calls that expire in the same month. The "spread" profits most should the ETF close at $44 over the next two and a half weeks.
EEM is made up of more than 800 global stocks, and its largest holdings include China Mobile Ltd. (CHL, 0941.HK) and Samsung Electronics Co. (SSNHY, 005930.SE).
Additionally, options traders, with unusual gusto, targeted ETFs that track Taiwanese and Malaysian stocks. Bullish positioning drove Wednesday's overall options volume in the iShares MSCI Taiwan Index Fund (EWT) to four times the daily average, according to data from Trade Alert.
One trader established a new position by purchasing roughly 15,000 January $13 call options. EWT rose 46 cents, or 3.9%, close at $12.35 Wednesday. The contracts turn a profit should the ETF gain about 7% and surpass $13.22 by the middle of January.
Meanwhile, in the iShares MSCI Malaysia Index Fund (EWM), traders targeted $14-strike calls that expire in December and January. Wednesday's call volume in the ETF was 15 times the daily average. Just 10 put options in the ETF traded compared with 15,000 calls.
Shares of EWM rose 79 cents, or 6%, to close Wednesday at $14.04.
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